REAL ESTATE NEWS

Artificial intelligence may accelerate the ultimate takeover of e-commerce in the retail sector, despite the current dominance of brick-and-mortar stores, Amazon CEO Andy Jassy told analysts during the company’s recent earnings call.

“If you look at the worldwide market segment share of retail, still 80% to 85% of it lives in physical stores,” he said. “That equation is going to flip over time. And I think AI is going to only accelerate that.”

Amazon sees a “significant opportunity” for growth in its grocery-focused physical stores, announcing plans to expand same-day delivery of fresh groceries to 2,300 cities by the end of the year, up from roughly 1,000 currently. While this strategy combines e-commerce and brick-and-mortar operations, Jassy anticipates a broader shift toward online sales over time.

Physical retail remains a small but growing part of Amazon’s business. According to RetailDive, Q3 online store sales rose 10% year-over-year to $67.4 billion, while physical store sales grew 7% to $5.6 billion. Overall product sales increased 9.6% to $74.1 billion. Notably, Amazon’s shipping costs rose 8% to $25.4 billion during the quarter.

While Amazon continues to gain share in retail, other parts of the business are growing even faster. Seller services sales grew 12% to $42.5 billion, advertising revenue jumped 24% to $17.7 billion, and subscription services rose 11% to $12.6 billion.

AI is playing a significant role in Amazon’s technology operations, particularly its AWS cloud business. Q3 net sales for AWS grew 20% year-over-year to over $33 billion. Analysts at William Blair noted that “AWS continues to drive the bus here, with acceleration in growth and better-than-expected operating margin in the segment.”

As part of its AI strategy, Amazon announced 14,000 layoffs, citing expectations that advances in generative AI will reduce the need for human labor in certain operations.

Source: GlobeSt/ALM